Operating leases for office equipment are often referred to as “off-balance-sheet financing” because lease payments do not affect a business’s balance sheet, since they are treated as an operating expense on the lessee’s income statement. Here is some information about why an operating lease is a beneficial option:
- An off-balance-sheet option is often considered better than alternatives, such as commercial loans, in which a business borrows money by leveraging an asset (i.e. accounts receivable). This creates a liability (the loan), which then must be reported on a balance sheet.
- In an operating lease, your business does not have to report any liabilities because you are not creating any debt or equity. This optimizes your financial leverage and can make your balance sheet more appealing to potential lenders.
- Off-balance-sheet financing can improve the overall financial health of your company by creating liquidity for your business but avoiding leverage. This can help keep your business’s debt-to-equity low, as well as other leverage ratios.
Overall, if you can arrange to rent equipment for your company using an operating lease, this kind of off-balance-sheet financing might help your company’s financial health.
If your business is looking to settle into some affordable commercial space for rent in Kansas City before figuring out your office equipment, give a commercial realtor in Kansas City a call at 913-685-4100!